Friday, June 13, 2014

More On Willfulness (6/13/14)

I write today to write on a facet of the willfulness requirement.  Most tax crimes in Title 26 require that the person have acted willfully.  In the tax crimes setting, willfulness has a specific meaning which many not apply in other criminal settings where willfulness is a statutory element of the crime.  In the tax setting, willfulness means the intentional volation of a known legal duty -- a very high mens rea requirement.

In United States v. Marshall, 2014 U.S. App. LEXIS 10415 (1st Cir. 2014), here, the court addressed the meaning of a statutory willfulness element for a nontax crime.  There, the defendant had been convicted "for knowingly and willfully obstructing the passage of mails under 18 U.S.C. § 1701."  Section 1701 is here.  The defendant was a USPS carrier who discarded some portions of the mail he should have delivered -- "Town Criers," local newspapers featuring advertisements, which post office customers pay to have delivered, although the newspapers typically identify the subscriber simply as "Current Resident" or "Postal Customer."

The cute question at this point is what is wrong with discarding such mailings?  Some people might think he is doing the postal service customer a favor.  But, of course, what he did was wrong.

So, he wanted to argue at trial and on appeal that, even if what he did was wrong, it was not willful and hence meet that element of the crime.

Former Supreme Court Justice Souter, writing the opinion, rejected his argument as follows:
The statute provides that "[w]hoever knowingly and willfully obstructs or retards the passage of the mail . . . shall be fined under this title or imprisoned not more than six months, or both." 18 U.S.C. § 1701. Marshall says first that the magistrate judge and the district court applied the wrong definition of "willfulness" in convicting him under 18 U.S.C. § 1701. The court followed the Second Circuit in United States v. Wooden in taking the position that showing willful action requires proof only that a defendant had an "illegitimate or improper intent" to obstruct deliverance of the mail. 61 F.3d 3, 5 (2d Cir. 1995). Marshall, in contrast, suggests that "willfulness" is shown only when a defendant knew his conduct was unlawful at the time he engaged in it. 
The statutory term "willfully" is a chameleon, what the Supreme Court has called "a word of many meanings whose construction is often dependent on the context in which it appears." Bryan v. United States, 524 U.S. 184, 191 (1998) (quoting Spies v. United States, 317 U.S. 492, 497 (1943)) (internal quotation marks omitted); see also United States v. Ladish Malting Co., 135 F.3d 484, 487 (7th Cir. 1998) ("'Willfully' is . . . notoriously slippery . . . ."). Although this Circuit has never explained willfulness under § 1701, the Supreme Court took up an early version of the statute in United States v. Kirby and read the phrase "'knowingly and wilfully' obstruct or retard the passage of the mail" as applying to "those who know that the acts performed will have that effect, and perform them with the intention that such shall be their operation." 74 U.S. 482, 485-86 (1868). While Kirby, to be sure, has an ancient ring to it, its precedential force is buttressed by the general rule that reenactment of a statute carries congressional approval of phrases with prior judicial construction. See Keene Corp. v. United States, 508 U.S. 200, 212 (1993) ("Since . . . these cases represented settled law when Congress reenacted the [statutory language], we apply the presumption that Congress was aware of these earlier judicial interpretations and, in effect, adopted them."). And Kirby's interpretation has been echoed by other federal courts applying 18 U.S.C. § 1701 in more recent decades, which have read the term "willfully" to require some level of intent greater than "inadverten[ce] or mere[] negligen[ce]." United States v. Johnson, 620 F.2d 413, 415 (4th Cir. 1980); see also Wooden, 61 F.3d at 5 (finding that "an inadvertent or negligent delay of the mail does not violate [§ 1701]"). 
Marshall, to be sure, does not argue that the willfulness requirement of § 1701 requires proof that a defendant was aware of the specific provision violated, as has been held with respect to some statutes in the criminal code. See, e.g., Ratzlaf v. United States, 510 U.S. 135, 149 (1994) (willfully violating financial anti-structuring laws); Cheek v. United States, 498 U.S. 192, 201 (1991) (willful tax evasion); cf. Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 126 (1985) (willfully violating the Age Discrimination in Employment Act). As the Supreme Court has explained it, "highly technical statutes" like the Internal Revenue Code and the currency structuring law present a particular "danger of ensnaring individuals engaged in apparently innocent conduct." Bryan, 524 U.S. at 194. To obviate that risk, their specific intent requirements "carv[e] out . . . exception[s]" to the "general rule that ignorance of the law or a mistake of law is no defense to criminal prosecution." Cheek, 498 U.S. at 199-200. 
Rather, Marshall's argument that the jury should have been required to find that the "illegitimate or improper intent" was unlawful rests on the Supreme Court's suggestion in Bryan (dealing with firearms sales by a vendor having no license as required) that criminal willfulness generally requires knowledge that the action charged was unlawful, albeit less specific knowledge than the statutes just mentioned. 524 U.S. at 196.1 This, as it turns out, was the position taken by the Government in a recent brief in opposition to certiorari to the Supreme Court in Russell v. United States, No. 13-7357, involving the construction of 18 U.S.C. § 1035; on the Government's concession, the Court vacated the appellate panel's contrary holding and remanded for reconsideration. 134 S. Ct. 1872 (2014). 
We think it is unnecessary to decide whether the Government's position in Russell should ultimately apply to the construction of § 1701. Even if we assume in Marshall's favor that it should, he is not entitled to a reversal here, for the reason that any error was harmless when assessed under the standard that instructional error, including omission of an element, is harmless if it is clear beyond a reasonable doubt that a rational jury would have found guilt absent the error. Neder v. United States, 527 U.S. 1, 18 (1999). 
Marshall, to be sure, testified that he was unaware that his destruction was unlawful, insisting that his supervisors "never" addressed the issue with him and that he "was not aware there was a problem until approached by [investigators]." This position was consistent with his emphasis, which we will mention again below, that his discards were not surreptitious, and that for some period of time his supervisors let him get away with his practice. Indeed, the trial judge observed that if knowledge of unlawfulness were a necessary element, this would be a closer case. 
But we think the case for guilt would surely have satisfied a knowledge-of-unlawfulness requirement. When he was interviewed by the investigators regarding his conduct, Marshall admitted that he was "not saying there's any excuse for it." The only way this admission could be squared with his claim of ignorance of the law would be to assume that he thought that throwing deliverable mail away was merely a departure from postal service practice lacking the sanction of law. But this probability is just too far-fetched. Marshall had to have known that he was being paid to make good on the responsibility of a national governmental agency to deliver mail entrusted to it. Since the agency was not an agent of charity, he must likewise have been aware that someone had paid money to have the Town Criers delivered, so long as they were deliverable. No front-line employee like him could have believed that the Government's obligation was not a requirement of the law, let alone that someone in his position would not be violating the law by taking the payer's money, in effect, while deliberately refusing to provide the service paid for. There is no reasonable doubt that a rational fact-finder would have found Marshall guilty of willfully "unlawful" conduct.
I have bold-face some of the text that I want now to discuss.

Justice Souter's language, of course, is consistent with the Supreme Court's language in Bryan v. United States, 524 U.S. 184 (1998), here.  I offer readers my discussion of this aspect of Bryan from my Federal Tax Crimes book (footnotes omitted):
Consider the following from the Supreme Court’s decision in Bryan v. United States, 524 U.S. 184 (1998), involving a federal firearm licensing statute which made it a crime to “willfully” deal in firearms without a federal license: 
The word “willfully” is sometimes said to be “a word of many meanings” whose construction is often dependent on the context in which it appears.  See, e.g., Spies v. United States, 317 U.S. 492, 497 (1943).  Most obviously it differentiates between deliberate and unwitting conduct, but in the criminal law it also typically refers to a culpable state of mind.  As we explained in United States v. Murdock, 290 U.S. 389 (1933), a variety of phrases have been used to describe that concept.  As a general matter, when used in the criminal context, a “willful” act is one undertaken with a “bad purpose.”  In other words, in order to establish a “willful” violation of a statute, “the Government must prove that the defendant acted with knowledge that his conduct was unlawful.” Ratzlaf v. United States, 510 U.S. 135, 137 (1994). 
In response to Bryan’s argument that “willfully” should be interpreted consistently with the interpretation of the term used in the federal tax laws, the Court said (emphasis supplied): 
In certain cases involving willful violations of the tax laws, we have concluded that the jury must find that the defendant was aware of the specific provision of the tax code that he was charged with violating.  See, e.g., Cheek v. United States, 498 U.S. 192 (1991).  Similarly, in order to satisfy a willful violation in Ratzlaf, we concluded that the jury had to find that the defendant knew that his structuring of cash transactions to avoid a reporting requirement was unlawful.  See 510 U.S. at 138, 149.  Those cases, however, are readily distinguishable.  Both the tax cases and Ratzlaf involved highly technical statutes that presented the danger of ensnaring individuals engaged in apparently innocent conduct.  As a result, we held that these statutes “carve out an exception to the traditional rule” that ignorance of the law is no excuse and require that the defendant have knowledge of the law.  The danger of convicting individuals engaged in apparently innocent activity that motivated our decisions in the tax cases and Ratzlaf is not present here because the jury found that this petitioner knew that his conduct was unlawful. 
As the Court noted, “willfulness” has variant meanings, but in part pertinent here the Courts seem to discuss two categories that highlight its meaning in a tax sense.  The first category of willfulness crimes requires the   
defendant to have known that his actions were in some way unlawful. [H]e need not have known of the specific statute, but rather he must have acted with the knowledge that he was doing a “bad” act under the general rules of law. Under this intermediate level of criminal common law willfulness, “the Government must prove that the defendant acted with knowledge that his conduct was unlawful.” 
The second category 
requires that the defendant knew the terms of the statute and that he was violating the statute. The courts have reserved this category to limited types of statutory violations involving “complex” statutes – namely those governing federal tax law and anti-structuring transactions. 
Under this rare exception (which covers our third and “strictest” level of criminal willfulness), a defendant must know the specific law that he is violating in order to act willfully.  The “highly technical” exceptional statutes to which the Court in Bryan refers are federal tax laws, for which the Court has explicitly “carv[ed] out an exception to the traditional rule” that ignorance of the law is no excuse. . . . 
The Ninth Circuit recently stated the two criminal statutory categories slightly differently: 
The Supreme Court's jurisprudence in this area has evolved over time, but now appears to establish two standards, one higher than the other, for “willfulness” in the criminal context.  In the context of criminal statutes, the word "willful" generally indicates a requirement of specific intent.  As a general matter, when used in the criminal context, a “willful” act is one undertaken with a “bad purpose.” Said otherwise, in order to establish a “willful” violation of a statute, the Government must prove that the defendant acted with knowledge that his conduct was unlawful. But in a context involving highly technical statutes that present the danger of ensnaring individuals engaged in apparently innocent conduct, the Supreme Court has suggested that “willfulness” requires the government to prove that the defendant acted with specific intent to violate a known legal duty. 
Now, on the second category – specific intent to violate a known legal duty.  You will recall that, in Bryan, the Supreme Court said that that standard required in tax cases that the Government prove the defendant was “aware of the specific provision of the tax code that he was charged with violating.”  Did the  Supreme Court really mean that?  The answer is no, at least according to the Ninth Circuit in a recent case (an answer that must be the right one).  In discussing the cases upon which Bryan relied for the statement (Cheek and Ratzlaf), the Ninth Circuit said: 
Neither of these cases, however, required the government to prove the defendant's knowledge of a specific provision of law. In Cheek, the Supreme Court held that “willfulness,” as used in the criminal provisions of the tax code, required the government to prove that the defendant knew of the legal duty to file an income tax return and to treat his wages as income. But the Court noted that the “jury would be free to consider any admissible evidence from any source” showing that the defendant was aware of this duty.  While Cheek listed “awareness of the relevant provisions of the Code or regulations” as one source of such evidence, it did not identify it as the exclusive source. Similarly, Ratzlaf held that the government could not carry its burden to prove the "willfulness" requirement in a prosecution for illegal structuring of financial transactions merely by proving that the defendant knew of the bank's duty to report cash transactions of more than $ 10,000. Nevertheless, the government did not have to prove that the defendant was aware of the provision of the federal statute that made it illegal to structure his cash deposits to avoid triggering the bank's reporting obligation. It was sufficient if a jury could reasonably conclude that the “defendant knew of his duty to refrain from structuring," a conclusion which could be based on "reasonable inferences from the evidence of defendant's conduct.” Similarly, prior to Cheek and Ratzlaf, we indicated that "willfulness" under a complex anti-exportation statute required proof of "a voluntary, intentional violation of a known legal duty," but we considered this standard satisfied where the government proved “that the defendant [knew] that his conduct . . . is violative of the law.” These cases make clear that even in the context of “highly technical statutes that presented the danger of ensnaring individuals engaged in apparently innocent conduct,” the term “willfulness” requires the government to prove that the defendant was aware of the legal duty at issue, but not that the defendant was aware of a specific statutory or regulatory provision. 
The Seventh Circuit said it more pungently in responding to an argument that knowledge of the Code section is required for “willfulness”: 
Knowledge of the law's demands does not depend on knowing the citation any more than ability to watch a program on TV depends on knowing the frequency on which the signal is broadcast.


  1. This strikes pangs of conscience. I once discarded over 120 advertising supplements to the Hudson Dispatch Every other carrier who worked out of the same district office committed a similar crime. The supplements weighed about three times as much as the papers and threatened to break our 12 year old backs. Hopefully the statute of limitations has run.

  2. ChiTownTaxAttorneyJune 14, 2014 at 9:47 AM

    I delivered 85 Chicago Tribunes for 5 years, 7 days a week, 365 days a year, beginning at at 4:30 a.m. That's when they were 2 inches think on Thursdays and a good 3+ on Sundays. OK, I did go on vacation once a week every year with my family. Kindly, my Father, a non-subscriber, saved my 12 year old back almost every day by "borrowing" Subscriber #85's paper. I'd come home after delivering 84 papers to retrieve #85 and complete the route. That came to a screeching halt the day Subscriber #85 finally called my supervisor to say coupons were mysteriously clipped from the advertising inserts. If only they had investigated further, popped the trunk of his car. I'm guessing about 15,000 counts for coupon larceny were in there.

  3. I had to read this page thrice to understand this blog completely. But as I understand it, even if the contextual definition of "willfullness" is applied differently in tax cases as opposed to nontax cases, the trap is that by a preponderence of the evidence (such as taxpayer's conduct), if a jury is able to find that the taxpayer was at some level aware that his actions were unlawful, then willfullness for breaking the law on the part of the taxpayer could very well be found and a judgment rendered against the taxpayer. This is despite the fact that a few statutes are highly complex and that those highly complex statutes might ensnare a seemingly unsuspecting taxpayer.

    Taking this a littel further, given that most Americans are not aware of even the BASIC statutes surrounding 7701(b) (worldwide income), 5329 (FBAR), or the terms surrounding it, can an examiner of the IRS, or EVEN a jury, really find a taxpayer guilty of willful conduct just by NOT checking the checkbox at the bottom of Schedule B of their tax returns? It would depend on all the facts and what else the taxpayer did. Indeed even the IRM goes into detail as to what other bad behaviour and illicit deductions the taxpayer had done for those years in question. Willfulness is a very high bar indeed.


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